RAPAPORT... After ALROSA’s February management shakeup, when Sergei Vybornov, head of the company’s investment arm, replaced Alexander Nichiporuk in the chief executive officer’s (CEO) chair, appointments are still underway. New vice-presidential appointees include Gennady Piven, Severalmaz president; Yuri Doinikov, director of Mirni mine division; Anatoly Popov, former head of the Mirninsky district and Valery Kurguzov, adviser to Vybornov. Meanwhile, in his first interview with Interfax as ALROSA’s president, on March 1, Vybornov outlined his vision of the company’s targets and defied some of his predecessor’s policies.
Vybornov denied the rumors of a possible merger between ALROSA and Norilsk Nickel as speculations based mostly on his and some of his team’s background. “There are no merger talks, and it doesn’t matter where such and such a person used to work,” Vybornov said. Nichiporuk recently said a merger between the two major Russian miners was possible, but could happen no sooner than in six months, which both companies need to finalize their restructuring.
In rebuking the previous management’s plan, Vybornov spoke against ALROSA’s appeal to the European High Court. Last summer, ALROSA legally challenged the European Commission’s (EC) ruling to halt all diamond exports from ALROSA to De Beers by 2009. “I, personally, don’t quite understand why we need it,” Vybornov said. “What’s the purpose of our litigation? To get back the contract with De Beers? But after export quotas were lifted, we need to develop our own sales system anyway.” Vybornov said ALROSA would review the possibility of withdrawing the appeal. However, the indefinite ban on trade between De Beers and ALROSA imposed by the EC ruling could hamper cooperative prospecting and mining plans, which Jonathan Oppenheimer, De Beers managing director, and Nichiporuk announced last September in Cape Town.
Vybornov reiterated the need for ALROSA to establish its own sales system to prepare for the time when De Beers ceases to be its primary buyer, and to be able to sell the bulk of rough on a trading floor in Moscow or Yakutia. “It would be more logical to arrange it so that everyone who wants to buy rough from the company comes here,” Vybornov said. Part of the rough will be sold through the overseas branches ALROSA recently established, but those branches were established primarily to get a feel for the market, he added.
Vybornov said that the federalization process is going according to plan, and would take another nine months to finalize “purely for technical reasons.” ALROSA then will be transformed from a closed to open joint stock company. Vybornov said an initial public offering (IPO) was possible, but only if the company increases sales.
“A share float? Why not? But we’d need to be cautious because there are no diamond companies there yet, no history track, let’s say,” Vybornov said. If accomplished, this would be a pilot project for the world diamond business. “It’s a good project because if you talk about the diamond business as a whole, then openness and transparency are long overdue,” Vybornov said.
Lev Leviev to Set Up a Diamond Holding
At the same time, another major player in the Russian diamond market seems to be courting the idea of transparency and pondering an IPO. Leviev Group announced plans to consolidate its Russian diamond assets into a vertical holding, which would include a small alluvial mining concern, two cutting plants, the Moscow jewelry plant and its retail chain of 74 stores.
“We want to become more transparent and understandable for investors,” Valery Morozov, director of Ruis Diamonds and Leviev Group’s representative in Russia, said in an interview with Vedomosti, the business daily.
Morozov hopes to secure permission from the Federal Antimonopoly Service within several months. He added that in the future, the holding could be interested in attracting financing through an IPO, bond issue or bank loans to increase its stock of supplies and investment in jewelry production facilities.
ALROSA’s Energy InterestsVybornov said in his Interfax interview that the company’s diversification into oil, gas and gold, Nichiporuk’s pet project, will likely be delegated to ALROSA’s investment arm, led by Igor Prokhorenko.
ALROSA might also partner with Gazprom for oil and gas projects in Yakutia by the end of 2007. The joint company will prospect for gas in Mirny, Lensk, Olekminsk and develop existing facilities.
Moreover, ALROSA hopes to sign an agreement on April 15 to explore for crude oil in Angola. Speaking during Russian Prime Minister Mikhail Fradkov’s Angola visit, Vybornov said ALROSA would have to spend around $30 million on exploration and that the company expects to find a Russian partner for the project. The deal is said to involve exploration onshore in the areas of South Kwanza, North Kwanza, Etosha and Ojiba, and Shelf Blocks 12 and 13 offshore.
The Marketplace• ALROSA’s 20th auction of special-sized diamonds, where rough from ALROSA-Nyurba was offered for the first time, sold 159 out of 166 offers for more than $23 million.
• ALROSA collected $4.8 million at the March 7 auction during the Hong Kong International Jewellery Show 2007, selling all 29 offers of rough totaling 4,500 carats. Polished sales brought ALROSA another $1.3 million. Vladlen Nogovitsin, head of Arcos Hong Kong, ALROSA’s Hong Kong branch, noted that the whole range of rough offered at the auction was in good demand.
Article from the Rapaport Magazine - April 2007. To subscribe click here.